EUR/USD surges more than 100 pips and closes near the 1.0700 mark

• The shared currency is extending its rally to two consecutive weeks and reached a new MTD high at 1.0691
• A hawkish ECB’s President Lagarde and risk appetite boost the EUR/USD.
• EUR/USD Price Forecast: Failure at 1.0700 would open the door for EUR/USD’s further downward pressure.

The EUR/USD is soaring and is closing to the 1.0700 mark, courtesy of the greenback trading in a softer tone, an upbeat market sentiment, and an additional “hawkish” boost provided by the European Central Bank (ECB) President Lagarde, saying that a rate hike on July, it’s possible. At the time of writing, the EUR/USD is trading at 1.0673.

Risk appetite and a hawkish ECB’s Lagarde lift the EUR/USD

As abovementioned, sentiment remains positive, as European bourses are closing with gains, while US equities lick their wounds and pare some of last Friday’s losses. China’s coronavirus crisis intensified during the weekend in Beijing, while conditions in Shanghai improved though it reported 570 new asymptomatic cases and 52 symptomatic.

The EUR/USD got a boost due to a weaker greenback. The US Dollar Index, a gauge of the greenback’s value against a basket of its rivals, is falling almost 0.80%, sitting at 102.218, a tailwind for the EUR/USD. On the contrary, US Treasury yields are rising, led by the 10-year benchmark note at 2.859%, gaining seven and a half basis points.

The ECB President Christine Lagarde crossed the wires, and she said that the ECB is likely to be in a position to exit negative interest rates by the end of the Q3 but pushed against 50-bps increases. She added that she expects net purchases to end early in the third quarter, allowing the ECB to hike rates at the July meeting.

During the day, other ECB policymakers spoke to the media. ECB’s Villeroy said that the Eurozone growth is resilient and stated that the ECB’s main focus would be to bring inflation back to 2%. According to Bloomberg, some ECB sources said that ECB President Lagarde’s plan to raise rates bothered some hawkish policymakers at the ECB who want a faster option.

During the European session, the EU docket featured IFO May Surveys on its different indexes, which unexpectedly rose more than expected, demonstrating the upbeat morale of German businesses, though maintaining investors’ spirits higher.

Meanwhile, the US economic docket featured the Chicago Fed National Activity Index for April, which rose by 0.47,  higher than the  0.36 of the previous reading, and further, Fed speaking, with Atlanta’s Fed President, Raphael Bostic, crossing the wires.

EUR/USD Price Forecast: Technical outlook

The EUR/USD daily chart depicts the pair as downward biased, despite reclaiming the 20-day moving average (DMA), which currently sits at 1.0530. Nevertheless, the rally appears to be overextended, as it is above the top band of the Bollinger’s band indicator at 1.0673, but the Relative Strength Index (RSI) above the 50-midline is aiming higher, with enough room before reaching overbought conditions.

Upwards, the EUR/USD’s first resistance would be the 1.0700 mark. Break above would expose the 50-DMA at 1.0772, followed by 1.0800. On the other hand, the major’s first support would be the 1.0600 figure. A breach of the latter would expose the 20-DMA at 1.0529, followed by the 1.0500 mark.